Why It’s Smart to Choose a Credit Union for Your Private Student Loans
College tuition rates have never been higher. One year’s average cost at a private college is now $54,000, and at a public college just over $26,000. When scholarships, grants, and aid from federal student loans aren’t enough to cover the cost, students turn to private loans.
Because they are not-for-profit and local, credit unions may be your best bet for finding a personalized loan that meets your needs with a payment plan you can manage after graduation. Here at Lanco Federal Credit Union, we offer several college funding options through our partnership with LendKey.
Read on to learn more about how credit unions like us make education financing more affordable and flexible for students, graduates, and their families.
The Difference Between Federal and Private Student Loans
Even families who have saved for college may find themselves in need of loans to cover the rising cost of tuition, room and board, and other fees.
There are two types of student loans: federal and private. Before applying for private loans, all students should first apply for federal loans, using the Free Application for Federal Student Aid (FAFSA). These loans have the lowest interest rates, which are always fixed. When these loans are subsidized by the government, the borrower does not need to pay back the interest while in school. You do not need to pass a credit check or have a consigner to qualify for a federal student loan.
However, the maximum loan amounts available are limited by what year student you are and whether or not you have family support. Even when students get the maximum amount available, they usually will still need to find a private loan to cover the rest of the costs.
Private student loans can come from banks or credit unions. Both offer loans with fixed or variable interest rates and look at students’ credit scores when determining interest rates. Students with higher credit scores will qualify for lower interest rates. Many lenders will also offer a lower interest rate if the loan cosigner (such as a parent) has a high credit score. Private lenders also offer repayment plan options, including in-school deferment and automatic payments.
Why You Should Borrow Your Private Student Loans from a Credit Union
Credit unions are not-for-profit organizations that convert their profits into savings and benefits for their members—for example, by offering higher savings rates and charging lower loan interest rates and fees. Plus, many credit unions tend to be more local and community-minded than banks, so they can also offer you a more personalized banking relationship. In other words, to a credit union, you are not just a student loan number. You are a member.
When you choose a credit union for your private student loan, your membership will give you access to many other benefits that the credit union provides, such as free checking and student credit cards (link to that blog post). And as a student, look for a credit union that offers you free mobile services and an extended branch network that’s available at home or at school, like Lanco Federal Credit Union in Lancaster County, PA.
When shopping for student loans from a federal credit union, students should compare multiple loan options before signing. Experts recommend that you should also compare loan origination fees, membership requirements, and repayment plans in addition to interest rates. You should also determine when repayment must begin, whether it is shortly after signing for the loan or when you are done with school.
Thinking ahead to after graduation means you should also find out if there are penalties for early repayment, what penalties exist for late or missed payments, and if there are any payment protection programs should you become unemployed.
When to Apply for a Credit Union Student Loan
Unlike the federal student loans that have annual application deadlines, you can apply for a private student loan from a credit union at any time. Ideally, it is best to apply about a month before you’ll need to access the funds so that the credit union has time to process your application, certify your college enrollment status and tuition expenses, and set up the disbursement of your loan.
Generally, private lenders, such as credit unions, will disburse loan funds at the start of the semester.
Find Competitive Student Loan Rates at Lanco Federal Credit Union
When you need a private student loan in Lancaster County, be sure to check out the competitive student loan options from Lanco FCU. Our friendly loan officers can help you to find a loan option to cover the gap between what you can get from federal loans, grants, and scholarships and what college costs.